Brazil Real Rises Most Among Major Currencies on Europe Outlook

Brazil’s real led gains among major currencies on speculation the European Central Bank will announce a stimulus program next week that will bolster demand for higher-yielding assets from emerging markets.

The real advanced 0.8 percent to 2.6223 per dollar at the end of trade in Sao Paulo, the biggest increase among 16 major currencies tracked by Bloomberg, and was up 0.4 percent this week. Swap rates, a gauge of projections for changes in borrowing costs, decreased 0.06 percentage point to 12.56 percent on the contract maturing in January 2016, extending the drop since Jan. 9 to 0.13 percentage point.

Switzerland’s unexpected decision to abandon the franc’s cap against the euro increased wagers that the European Central Bank will announce stimulus next week, according to Andre Perfeito, the chief economist at Gradual CCTVM. Concern that Brazil’s fiscal deterioration would lead to a reduced credit rating helped push the real down 11 percent in 2014.

“The move in Switzerland makes investors believe a stimulus program should come in the euro zone, and that means more money available to flow to emerging markets in the short term,” Perfeito said in a phone interview from Sao Paulo.

Optimism that the new economic team appointed by President Dilma Rousseff will revive growth in Latin America’s biggest economy will probably attract foreign investors in the first half of the year and give support to the real, Perfeito said.

Finance Minister Joaquim Levy helped to push the real higher on Jan. 13 when he told reporters that seeking to cut gross debt below 50 percent of gross domestic product in the long term would be a positive step.

To support the real and limit import price increases, the central bank sold the equivalent of $98.3 million of currency swaps Friday and rolled over contracts worth $489.6 million. It plans to offer as much as $100 million a day until at least March 31, compared with $200 million a day last year.

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